The end of contingency fees?

Dan Brennan (left) welcomes proposals which may prevent lawyers from entering into contingency fee agreements in potentially contentious matters.

The Lord Chancellor, Lord Irvine stated in the House of Lords in February: "I do not want to see contingency fees introduced in relation to cases before the courts… contingency fees are at common law unlawful and unenforceable."

The Bar agrees. It would be lamentable if the ethos of contingency fees – in which a lawyer is entitled to a percentage of monies recovered by a client – worked its way into our system. Although there is a risk that this could happen, there is also a remedy.

The risk arises from the work of claims assessors in personal injury and employment tribunal claims who offer to recover compensation for a fixed percentage of the damages recovered. Claims assessors can provide legal services even though they may be unqualified.

Additionally, in stark contrast to the Bar – which forbids the charging of contingency fees for tribunal work – the Law Society has taken the view that because of the statutory definition of a court in the Solicitors Act 1974 employment tribunal work is not contentious, so solicitors can claim contingency fees.

Lord Irvine said of claims assessors in January: "…if there is a need for regulation in this area to protect the consumers and legal services, I would not hesitate to promote the necessary measures".

As to work done by solicitors in employment tribunals on such a fees basis, Lord Irvine said in February that he had taken up the matter with the Law Society and was considering representations it had made to him.

The Access to Justice Bill seeks to clarify the basis on which lawyers can make costs agreements with clients. Clause 29 of the Bill amends the law, giving statutory effect to the decisions in Thai Trading Co v Taylor and Bevan Ashford v Yeandle.

Clause 29 makes lawful both conditional fee agreements (CFAs) – normal fee plus percentage uplift – and the speculative fee agreements envisaged by Thai Trading – no win, reduced fee.

The Law Society has dealt with the latter already by changing its rules to introduce the power to charge fees on this basis.

Traditionally contingency fees have been regarded as lawful in non-contentious business, but clause 29 radically alters this. The clause provides that only a CFA which complies with the Act will be enforceable.

A CFA is redefined as: "An agreement between a person providing advocacy or litigation services and his client which provides for the fees and expenses of the person providing the services, or any part of them, to be payable only in specified circumstances."

The proposed law forbids contingency fees in any "agreement with a person providing advocacy or litigation services". Advocacy and litigation services are defined as the contemplated exercise of rights of audience in relation to any, or contemplated, proceedings in a court or any tribunal which the Council on Tribunals is under a duty to keep under review. "Proceedings" are defined as "any sort of proceedings for resolving disputes (and not just proceedings in a court)".

The combined effect appears to be that the law will invalidate contingency fee arrangements, even those which have hitherto been considered lawful. Thus the statute proscribes all contingency fee arrangements by lawyers in potentially contentious matters whether or not there is recourse to litigation. So contingency fees ought not to be claimable by a solicitor in employment tribunals if clause 29 becomes law.

What of claims assessors? The new policy is apparently to proscribe all contingency fee arrangements. The courts may well develop the common law to match the statutory intent and declare unenforceable contingency fee arrangements involving non-lawyers even where there has not been any litigation. This is a necessary clarification of the law. If the Government does not intend the law to have this effect then it must act during the course of this Bill. It would not be in the public interest to fail to reach a firm position on contingency fees – one way or the other!

Dan Brennan is chairman of the Bar Council.